Stanley Druckenmiller’s Duquesne Capital easily outpaced the timid Q1 market, in which the S&P 500 returned just 0.9%. The billionaire’s fund, now a family office closed to outside investors, continues to report its quarterly holdings with the SEC via Form 13F’s. In its latest filing, which disclosed its equity portfolio as of the end of 2014, Druckenmiller reported 35 long positions, 34 of which were in companies with market caps of at least $1 billion. Those 34 positions had strong weighted average returns of 7.7% during the first quarter.
Druckenmiller announced the closure of his fund to outside investors back in 2010, expressing the challenges of managing a large amount of money both in the personal toll it takes as well as in the difficulty of generating the same high returns. Our own research also suggests this is the case and that as funds grow larger and larger and must allocate more and more of their investment dollars into large-cap stocks, their returns inevitably take a hit. That’s because their top large-cap picks simply don’t generate the same returns that their small-cap picks do, which we discovered through exhaustive research of the period between 1999 and 2012 (see the results). Since launching our small-cap strategy at the end of August 2012, which only considers funds’ top small-cap picks, the strategy has returned greater than 137% and outperformed the market by 240% during that period.
Biogen Inc (NASDAQ:BIIB) was Druckenmiller’s top pick at the end of 2014, and also a top biotech stock among billionaires as a whole. Druckenmiller was extremely bullish on Biogen Inc (NASDAQ:BIIB) during the fourth quarter, increasing his stake by 247% to 359,400 shares. That vaulted Biogen from the sixth most valuable position in his portfolio right to the top of it, with his exposure to the stock increasing to 11.96% from the 4.21% exposure he had to it at the end of the third quarter. The move certainly paid off, as Biogen Inc (NASDAQ:BIIB) had a big first quarter, returning 24.39%. Israel Englander and Paul Tudor Jones were a couple of the other billionaires invested in Biogen.
After its disastrous launch in Canada, which eventually led to it pulling out of the country completely, Target Corporation (NYSE:TGT) may not have seemed like the wisest of investments. However its stock has been white-hot since the middle of October, gaining over 35%, including 8.85% during the first quarter. The good news for Target Corporation (NYSE:TGT) is that while its Canadian operations were floundering, its much larger U.S operations were flourishing. Same-store sales have seen a big bounceback from disappointing numbers earlier in the year, and online sale have greatly improved. The skepticism from some investors could be seen heading into 2015, with two of the three largest positions in Target Corporation (NYSE:TGT) from funds in our database consisting of put options underlying shares, with one of those positions being held by billionaire Ken Griffin. Druckenmiller on the other hand had the greatest long exposure to the stock at 5.66%, with his position of 760,600 shares, which he again wisely increased during the fourth quarter, by 144%.
The Home Depot, Inc. (NYSE:HD) is another stock that had a lot of skeptical investors betting against it in the latter half of 2014. As with Target, those skeptics got knocked out by the home improvement retailer’s much improved results. In yet more parallels to Target, Druckenmiller increased his position in The Home Depot, Inc. (NYSE:HD) by a nearly equal amount, 138% to 529,100 shares, and the stock had nearly identical returns to Target’s during the first quarter, at 8.79%. Funds in our database were less skeptical about The Home Depot, Inc. (NYSE:HD) heading into 2015 however, with the top positions all being long, which included positions by billionaires Griffin and Ken Fisher.
Social media king Facebook Inc (NASDAQ:FB), and Chinese e-commerce giant Alibaba Group Holding Ltd (NYSE:BABA) rounded out some of Druckenmiller’s top picks, though with vastly different results. Facebook Inc (NASDAQ:FB) continued its strong run of nearly two years now, with Druckenmiller’s new position of 430,000 shares seeing returns of 5.38% during the first quarter. It was a swing-and-miss for Druckenmiller onAlibaba Group Holding Ltd (NYSE:BABA)however, as his bullish move to increase his position in the company by over 2,400% during the fourth quarter to 253,900 shares backfired, as Alibaba Group Holding Ltd (NYSE:BABA)shares fell by nearly 20% during the first quarter. The quantitative analysis fund D E Shaw, founded by billionaire D.E Shaw, was one fund that had the two stocks pegged, owning a large long position in Facebook Inc (NASDAQ:FB) at the end of 2014, and a large position of put options underlying shares in Alibaba.
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